Checking Basics
Debit
A sum of money deducted from your account (debit cards take money away)
Advantages: allows you to transfer funds between accounts, allows you to pay bills, can check balance easily/quickly, lower fees, disadvantages: can't use an ATM to withdraw money (as there are is no physical bank), takes longer to process money when depositing/withdrawal, higher interest rates
P2P
P2P payment app
-"Person to person" payment; a digital payment method that allows you to transfer funds from your bank account to another person
-Apps that allow you to do P2P payments such as PayPal, CashApp, Venmo, Apple Pay Cash (Apple Pay is used for stores), Google Pay, Samsung Pay
Regular savings account
A deposit account held at a bank/financial institution which often may give you a modest interest rate; safe and reliable when needing to pay short-term needs
Strategies for personal saving
6-month emergency savings fund
-Splitting your paycheck, automatic deposit, 50/20/30 rule, compound interest, lending circles, using apps (deposit money into a savings account before spending on wants- pay yourself first)
-Money set aside for unanticipated expenses/loss of income; helps account for rent while covering bills/expenses/events
Checking account
Ways to access the money in your checking account
-A type of bank account that allows you to deposit and withdraw money from daily transactions (everyday expenses)
-ATM, withdrawal, debit card, online banking, writing checks, visiting your local branch
FDIC Insurance
Protection provided by the Federal Deposit Insurance Corporation; protects the deposits of customers against loss up to $250,000 per account
Online bill pay
A consumer banking technology that allows you to schedule and make payments over the internet
Certificate of Deposit
A brank product that pays/earns interest on a lump-sum deposit that's untouched for a predetermined amount of time; type of savings account that pays a fixed interest rate for not withdrawing for a certain amount of time
Short-term goal examples
Medium-term goal examples
Long-term goal examples
-(takes <2 months) saving for groceries, paying $2000 in credit card debt, paying down student loans, buying a new phone
-(2 months-3 years) buying a car, saving for college, starting a business, investment grade corporate bonds, emergency fund
-(>3 years) saving for retirement, buying a house, paying for a child's education, paying off mortgage
Direct deposit
Withdrawal
-An autonomic electronic deposit of net to an employee's designated bank account (employer deposited a paycheck for an employee)
-Taking money out of your bank account
-Entry balance = Previous balance + deposits - withdrawals - fees
Overdraft Protection
A loan bank offer to their customers when they try to withdraw more funds than they have in their account, usually for a fee and with interest; they can charge you an overdraft fee which is around $30 which can pile up upon your account and make you owe more money
What is a digital wallet?
An application that runs on mobile devices. It securely stores your payment information and passwords and allows you to pay for items without needing your physical cards
Money market account
A type of savings account offered by banks/credit unions; insured by the FDIC; tends to pay you higher interest rates and more useful for short-term expenses; may allow debit card and check writing privileges but are limited
50/20/30 Rule
The rule that advises you to devote 50% of income to needs, 20% to savings, and 30% to wants; 20% may be used to reduce debt, allows you to set boundaries while still treating yourself
ATM
Automatic teller machine; allows a person to manage a bank account holder's funds through actions such as withholding or depositing money, viewing account balances, etc.
Bank statements
A monthly document prepared by your financial institution which shows all of the transactions related to your account
Check cashing businesses
A business that cashes checks and gives the customer cash in exchange for a fee for the service
Interest
Compound interest
-The amount you earn as a benefit of depositing money in an interesting bearing account
-Reinvesting earned interest back into the principle to allow money to grow exponentially over time (original amount + interest)
Needs vs. wants
Needs: housing, utilities, food, transportation, healthcare, childcare; wants: eating out, electronics, shopping entertainment, vacations, streaming services
Processing times
-A slip of paper that's processed from your checking account; you write an account of money and the name of the recipient who will receive that money
-5 business days to process a payment (paying bills online); paycheck deposit would be processed first, check deposit at ATM takes 1 business day; wire transfers, direct deposits, cash deposits with a teller are processed on the same business day (for TCF)
Low balance alerts
A notification that lets you know if the balance in your checking account goes below a set amount
Realistic current interest rate on a savings account
How is an online savings account different from a traditional savings account?
-Average is 0.45%
-Online savings account operate online fully and tend to offer higher interest rates and have no physical bank branch
Difference between saving and investing
Saving is for short term purposes and putting money in a secure place for the future while investing is taking some risk through buying assets that may increase in value and provide you with more money over the long term